More in this guide

MSE's focus is helping consumers, yet many small business owners also want help. This guide includes some top picks, but primarily utilises the best of other sites' tools. Please use the feedback links in each section to help us finesse the info.

What do I need to do when I set up a business?

It's a common question - who do you need to tell/register with to set up a business? This Gov.UK page has the basics of setting up the things you need, but, it won't surprise you to hear that one of the first people you should tell is the taxman.

HMRC has set up an online 'e-learning course' to help you with questions you might have about tax and national insurance, or how to start and keep the correct business records.
It's useful if you're just setting up and helps you start with good business habits.

Best business bank accounts

Once you're registered, you'll need to find a business bank account. Unlike personal bank accounts, which are usually fees-free if you're in-credit, the opposite's true for their business brothers. Charges of £25 per transaction are possible on top of monthly account fees, and this can be a nightmare. There are four steps towards beating these.

Step 1: Use a personal account if you can

If you are a sole trader (not a limited company), then you may be able to use your normal bank account for your business, with all the better terms that involves (though check your terms & conditions - some banks won't allow this).

However, using a separate, dedicated account could make your record-keeping a lot easier. It could also be a huge help if HMRC selects your tax return for an in-depth inquiry. For all the best buys, see the Top Bank Accounts guide.

If you make a large number of transactions, deal with big sums, or need to regularly bank cash, then your bank may suggest getting a business account. If that's likely, start with the right one straight away.

Step 2: Lowest charge business bank accounts

Three accounts stand out, based on charges:

The Santander Start Up Business Account offers unlimited free day-to-day transactions for a year - or 18 months if you're already a Santander customer. It also pays 0.25% in-credit interest. After the end of the free period, you can choose from four different fees between £7.50 and £40/mth depending on monthly cash deposit withdrawal limits (you can choose from £1,000 to £10,000).

NatWest's Start-ups package has two years of free unlimited transaction banking. After that, you revert to their standard tariff, at which point you pay per transaction.
You can open the account if you started trading within the last 12 months, and the company's turnover is less than £1 million. Apply online, or call 03333 558237.

These are effectively just like consumer bank accounts and have limited features. So if you need complex facilities, such as an account that automatically works with accounting software or need business assistance, you can get these from banks, but at a price.

Even if you can't find one with the services you like at a low charge, don't give up with business bank accounts. It's often possible to negotiate with your bank to waive the charges, so long as you stay within set transaction constraints, for example, a maximum of 10 requests to process business cheques each month.

Step 3: Minimise the charges you pay

Whatever the account, make your first job listing the fees that apply to it. Ensure you (and any staff) are aware of them.

Think about how you operate to minimise charges. Make sure you're paid by BACS rather than cheque, stick to online banking, cut down on the cash you pay into the account, use automated transactions where possible and avoid using unauthorised overdrafts.

Make sure you check the charges in your statement, it may also help you spot problems. For example, if you accept a cheque that's been returned unpaid by the debtor's bank, your bank will charge you an administration cost, and you won't get the money due. So then you can chase the payment up, and ask them to pay the incurred charges too.

Step 4: Sweep cash into savings

If you're in the fortunate position to build cash up in your account, be sure to have a business savings account linked to it. Then you can sweep the money into it to maximise interest (see below).

Small business owners and those who are self-employed can apply for the Capital One Business card, which gives a big 5% cashback for the the first 99 days (max £100 cashback in that time). After that, the rates are tiered, paying up to 1.25% cashback.

To get one, the person applying (not the business) needs to have an excellent credit rating, have an income of £20,000+ and even own their own home. These are pretty strict criteria.

Good if... you want a fee-free business cashback card.

You must repay in full every month, or you'll be charged 16.9%
representative
APR.

There's no cap to the cashback you can earn in a year, yet the £100 intro maximum applies to the first 99 days, so if you spend over £2,000 (5% of which is £100) in the first three months, the extra is wasted for cashback purposes.

After that, your spending resets, so the next £6,000 you spend is at 0.5%, then you move up the tiered rates.

Annual spend...

£3,000

£5,000

£10,000

£20,000

Year one cashback

£49

£81

£145

£233

Years two+ cashback

£15

£25

£70

£195

Considering this card? See our extra info and tips to save more

Time applications. Apply before a period of big spending to ensure you get the full 5% cashback in the first three months.

Add additional cardholders. You can add up to three additional cardholders onto this account, though they must all be employees. Although only do this if you trust them, as the main cardholder has full responsibilty for all spending and payments.

Is more cashback possible? Users of cashback sites (which are free to join) may be able to get even more cashback when they sign up. If you're new to cashback sites, read the Top Cashback Sites guide for an explanation and key warnings.

The Barclaycard Cashback* business credit card is available to small business owners and those who are self-employed, though there is a £32 annual fee.

It gives 3% cashback on office supplies and stationary, legal and accounting services, IT equipment and support, 1% on petrol and 0.5% everywhere else. You'll also get three months 0% on purchases and a year's extended warranty cover.

To be eligible, the person applying (not the business) needs to have an expected annual income of £10,000, have a record free from missed payments and not had any county court judgments in the last six years.

Good if... you want a few perks in one

Cashback is capped at £400 a year. If you earn less than £10 in any year, the amount won't be credited to your account and won't be carried forward so make sure you'll be spending more to max the gains and also effectively wipe the annual fee.

You must repay in full every month, or you'll be charged 19.9% on purchases. If you include the fee, it equates to a 25.1%
representative
APR.

Add additional cardholders. You can add additional cardholders onto this account, though they must all be employees. Although only do this if you trust them, as the main cardholder has full responsibilty for all spending and payments.

Is more cashback possible? Users of cashback sites (which are free to join) may be able to get even more cashback when they sign up. If you're new to cashback sites, read the Top Cashback Sites guide for an explanation and key warnings.

Other offers

If you don't want cashback, or don't spend enough on credit to make it worthwhile, then other good business cards are available.

Get 20,000 reward points when you spend £3,000

Small business owners and those who are self-employed can apply for the American Express* Gold Business card. It's a charge card, which means that you don't pay interest, but also means that you MUST pay off the card each month.

The card has a £125 annual fee, which must be paid before any purchases are paid off, though this is waived for the first year that you hold the card.

You earn membership rewards points at the rate of one point for each £1 you spend. When you've spend £3,000, 20,000 bonus points will be added to your account, enough for a return business class flight to Europe (though you still need to pay taxes etc).

Good if... you want to collect reward points.

You must repay in full every month, or you'll be charged £12 and a default marked on your credit file. Purchases will attract up to 54 days interest free.

If you want a fee-free card, you can choose the Business Basic Card from American Express. It's a charge card, but has no annual fee. You also don't earn rewards points.

Considering this card? Click for more information

Rewards. You earn one reward points for almost every £1 you spend. Spending such as cash withdrawals, Travellers Cheques, and paying your card fee does not earn any points.

Spending rewards. You can spend your rewards points with one of several travel partners including BA, Virgin, Eurostar and Hilton. You can also use them for shopping at partners such as BOSE, Molton Brown, Sony and Apple.

Top business savings

If you have spare cash that isn't needed day-to-day, it makes sense to stash it away. Yet where to put it depends on what type of company you have.

Sole traders - Use the top personal instant access accounts

Being a sole trader means money from the business is in your name and so can be moved into accounts opened by you. This allows you to get the top personal savings account rates, which beat specific business accounts hands down.

Limited companies - Find the best-paying business savings

If you have a limited company, then legally the company is an entity and the money belongs to it, not you. If you tried to move money into your own name, it will trigger a tax liability.

So if you just want somewhere to stash the company's cash and earn interest, then you need a business savings account. They're sometimes called "deposit", "reserve" or even "investment" accounts. But with all, the aim is to put your money somewhere safe and maximise the interest on it.

The highest rate depends on how much access you want to your cash, and the amount of money you've got to save.

Top instant-access savings: State Bank of India UK 1.5% AER

The State Bank of India UK Business Instant Access Savings Account pays 1.5% AER on £10,000 or more. You'll get no interest if your balance slips below this.

You can make any number of deposits or withdrawals up to a maximum balance of £5 million. You need to apply by post or in branch, but can operate the account online after it's opened.

How safe are business savings?

Smaller businesses get £85,000 guaranteed savings protection per financial institution, but big companies don't. To understand how this protection works, see the Savings Safety guide. If your business meets criteria below, it'll be protected like an individual.

The definition of what counts as a small business does leave a bit of latitude, though.

Sole traders.

Because the business is in your own name, regardless of how big the company is, you get the normal £85,000 per person, per institution savings safety.

Limited companies.

Provided they meet two out of the following three conditions, the FSCS say they are "likely to be covered".

Turnover not more than £6.5m

Balance sheet of less than £3.26m

Less than 50 employees

EU banks' savings safety rules are similar. They protect deposits for sole traders and small businesses fitting the above criteria up to a value of €100,000.

Cut business gas & electricity bills

Just like domestic energy bills, it's possible to compare and switch to cheaper providers. The right comparisons to use depend, again, on the type of business you're running.

Limited companies (or anyone with commercial premises)

Here, you're limited to using special business tariffs, but luckily some of the top energy price comparisons have cottoned on to the small business market.

However while there are websites, their business comparison services tend to operate through callback systems (where you ask for a phone call to go through the savings with you), rather than online.

The possible savings are huge, though. For a sample postcode we tried in the north west of England with an annual electricity bill of £3,500 using the regional electricity company, it was possible to cut the bill to £2,300 - a saving of £1,200!

Sole trader (working from a house)

If you are working on a small scale, eg, in your own home, and are a sole trader, you can usually deduct a proportion of your household bills as a business expense.

Switch the house to the cheapest gas and electricity providers using the top standard price comparisons (plus get cashback), using the normal Gas & Electricity switching technique.

Use less energy!

The bigger the bills, the more you can save by being energy efficient. Spend a little money on decent draft insulation, then turn off lights, turn computers off standby, and more. See the Energy Saving Trust for advice.

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Office phone and broadband

Costs here can vary enormously, depending on whether your business is consumer-facing and how professional your telecoms need to appear.

Are you based at home?

If you run a small business from home, most will find it cheaper using a domestic supplier for their phone and broadband. It's possible to get a landline installed for free, and broadband with line rental line and calls from £10/month. See the Cheap Home Phone and Cheap Broadband guides for full info.

Ask yourself whether you need additional features though, such as the ability to forward calls to your mobile or call diversion, or a faster internet connection with a large download limit. Also consider whether you'll want extras like your own dedicated webspace, or an intranet.

If you think you'll need these sort of features, consider plumping for the options below. They're more expensive, but are aimed at business or office premises.

Business services

Don't think you need to take all your communications services from one provider. Review all the options for the cheapest line, broadband and calls providers and then see whether you can cut costs further. Do remember to check usage limits for broadband packages.

Need to get a line installed?

The vast majority of lines are provided by BT Openreach, even if you pay line rental to Primus, the Post Office or others.

Currently, Primus is offering free line installation if you sign up to its phone & broadband service for 24 months. It charges £49 to install a line if you don't get broadband too.

Get the cheapest deal.

Because you'll probably need both a phone service and the internet, it may be worth buying a bundled package. But don't assume that these are necessarily cheapest.

BT's Featureline Compact* is one of our best buys. If you sign a three-year contract it's £19.05/month + VAT. You get 500 mins/mth to UK landlines and features including call waiting, transfer and conference calling.

For cheap broadband, TalkTalk Business is from £4/mth on a one-year contract, or from £19/mth if you want fibre, but you must have its £14.50/month line rental to get them. Even so, overall it's one of the cheapest.

Remember that with the comparison services, they won't mention or factor in the override providers below, which can substantially save you cash.

Slash call costs with override providers

All the main calls packages include some free calls, but you can slice the cost of the rest too - whether it's calls to daytime landlines, mobiles, international or 0870 numbers.

This is all about the use of override providers. These are specialist firms which you can access without changing your phone provider and get much cheaper calls. More info below.

Small business broadband scheme

Small businesses are now able to apply for grants to improve their broadband connection through a £150 million Government scheme called the SuperConnected Cities programme.

It's been set up to help small businesses improve their broadband speeds, which the Government has said is key to boosting economic growth. The scheme began in December 2013 and is open to small businesses in any of the 22 cities listed on the Connection Vouchers website.

The grants, which come in the form of vouchers, are worth up to £3,000 and can be used with any broadband supplier to install superfast broadband in your business premises. The vouchers only cover installation, so if, for example, you're quoted £1,000 to install superfast broadband, you will receive a £1,000 voucher.

To join, your business must fit the following criteria

It must be in one of the 22 cities taking part in the scheme.

It needs to be an SME with less than 250 employees or a registered charity, social enterprise or sole trader.

Installation of your new broadband connection must cost more than £100.

The connection needs to be for the business premises – this can be a residential address if it's the main work base.

You must be willing to sign up to a minimum six-month contract with the broadband supplier.

The broadband service you select must deliver a speed or performance improvement on your current connection. There are some detailed requirements on speed that you should check before applying.

You must not have received more than £120,000 in grants in the last three years.

The top override providers

If calls aren't included in your 'free minutes', the cost can really stack up. Providers charge up to 4p/min or more for daytime calls to landlines, and around 10p/min to call mobiles. It's easy to slash the price.

Sign up to 18185, then dial that number before every call you make. This gets you access to much cheaper call costs: 6p/min to mobiles during the week, 7p/min at weekends. And just 5p per call to phone other landlines, no matter how long you speak.

Alternatively, if your provider blocks the use of 18185 (TalkTalk does, for example), use the daily updated UK CallChecker to find the cheapest simply dial providers, where you phone an 0844 number, then your destination. These cost as little as 0.5p/min.

When using overrides, always do some test calls to check your landline provider's charging the price you're expecting before going hell for leather on calls - it may operate a different pricing regime and cost you much more. For more info, see the Home Phones guide.

VoIP (Voice over Internet Protocol)

Another option's to use VoIP, which is now reliable and popular. Skype* is the most popular service. It provides free voice and video calls to anyone else who is also on Skype, as well as a subscription service for calling landlines and mobiles.

If you need to be able to make all your calls to regular phone numbers, it's worth noting that many providers now offer specialised business services. See Free Web Calls for details.

Insurance

It's possible to slash insurance costs right across the board. But before you get to that stage, it's worth checking exactly which policies you should have.

If you have staff, there are some compulsory policies. Similarly, even if you work from home & have clients visiting, you need insurance then too. The tools below should establish exactly what you need.

Here's a quick run though of some of the key ones. We've also linked to some comparison services, though you may be able to negotiate a better deal by using local brokers and putting all the policies through them.

Car and van insurance

If you're using a van or car for your business, make sure you tick the 'business use' box. Depending on your occupation and the level of business use could have an impact on the premium. Use the Cheap Car Insurance or Van Insurance guides for full info.

Or, if you only occasionally need to use a car or van for your business, a car club is an option. See if Zipcar for Business*, City Car Club or Co-wheels have cars or vans in your area. Assess your vehicle usage to see if you could save money.

Do you have employees?

If so, you'll need employers' liability (EL) insurance - cover of at least £5 million is required by law for limited companies and you can be fined up to £2,500 for EACH day you aren't covered. There's an exemption if the limited company has only one employee, and that employee owns 50%+ of the company.

These policies protect you and your business for any claims made by employees who have been injured at work, or experienced illness as a result of work, where the fault lies with you. It also covers you for expenses in legal cases against your business taken by employees.

Plus, if your business goes into liquidation or receivership, EL insurance means your employees can still claim and be paid damages.

While that's the only compulsory service, others to consider include public liability insurance. This covers damages and legal fees if your business has caused injury or death to a member of the public, or damage to their property.

There are also business premises insurance, contents insurance (for stock, machinery and contents) and product liability insurance & professional indemnity insurance.

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Grab grants to aid your business

Any leg up in business is worth taking - especially if it's from the Government. There's a lot more money out there than you think, many businesses thrive on grant cash.

These often come with strings attached, for example it may provide the cash for you to invest in equipment but you need to match it with your own cash. However, watch for companies charging upfront to access grant lists - some have subscription charges, but make sure you know what you're paying for.

Grants are typically pretty specific, and can only be spent on certain costs, or are targeted at small locations or industry sectors. Funders will also probably want to see a business plan, so prepare this in advance to make the application process quicker.

Free courses for your employees

As part of the Government-funded Train to Gain programme, employers in England of all sizes and in all sectors can get free or subsidised training courses for their employees. Companies are given a training package tailored to their business. Free courses tending to be for literacy and numeracy, but apprenticeship and leadership and management skills are also available. Similar programmes are available in Scotland, Wales, and Northern Ireland.

Gov.uk

Gov.uk's Support for Businesses pages let you search for start-up or business development help. You can search for financial assistance, advice or practical involvement with projects.

Finding funding

Three free websites, Grantnet, j4bCommunity (free for basic searches only) and Grants Online (14-day free trial then subscription from £25/month) all give information on funding in the UK for small businesses, community groups or voluntary organisations.

Green Grants Machine lists grants to help businesses become more environmentally-friendly, such as purchasing hybrid fleet vehicles, installing solar panels, or introducing a recycling scheme in the workplace.

Governmentfunding has a searchable database of government grants for the voluntary and community sector, with downloadable application forms and guidance documents.

Local council grants

There may also be grants from your local council. Search for details on its website or contact it to ask for more information. To find your local council's details, enter your postcode in the Gov.uk website.

Representative APR

Where credit cards or loans use a representative APR, this means that 51% of successful applicants will be given the stated interest rate.

Credit Cards

With credit cards, the rate for purchases (as opposed to balance transfers or cash withdrawals) is used as the main rate to advertise the card.

So if that is described as 19.9% representative APR, then 51% of people accepted will get 19.9% APR, but 49% will get a different rate (likely to be higher).

Personal Loans

Loans are slightly simpler as they only have one rate. So if a loan is advertised as being 7.5% representative APR, this means 51% of accepted applicants will get 7.5%, and 49% will get a different rate (likely to be higher).

Of course, some people will be rejected outright for the card or loan too.

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